While granting the exemption or renewal of exemption under section 80G(5) of the Act, the role of CIT is limited to look into the nature of activities being carried on by the institution or fund and the violation if any, of the provisions of section 13 of the Act and its various subsections are to be looked into by the Assessing Officer while deciding the issue of grant of deduction under sections 11 and 12 of the Act
Transfer Pricing: Comparables have to be excluded by the turnover filter without a FAR analysis being required to be conducted. The AO cannot rely on information obtained u/s 133(6)
Full Judgment PFA
ITAT quashes 263 order on issue of shares at high premium
Elder IT Solutions Pvt Ltd. Vs. CIT (ITAT Mumbai), Appeal No. ITA NO.3325/Mum/2014, Date of pronouncement 12-12-2014
Issue- On the issue of share premium money and unsecured loan, the Commissioner held that the order of the Assessing Officer suffers from several defects as the Assessing Officer has not raised any question while recording the statement with respect to the credentials of the applicant companies. The statement recorded in stereo type and no question has been asked by the Assessing Officer with respect to the capacity of companies who have given the loan to the assessee. Thus the Commissioner has questioned the justification of payment of premium of Rs. 999 on a face value of Rs. 1 per share when the assessee company does not have any credentials in the market to attract the huge premium on its preferential share. Accordingly, the commissioner held that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue with respect to the claim of depreciation on revival of dormant subscribers and acceptance of unsecure loans of Rs. 487.55 crores and preference share of Rs. 139.86 crores. Therefore, the Commissioner set aside the assessment order and remanded the matter back to the file of Assessing Officer for a fresh consideration after giving reasonable opportunity to the assessee of being heard.
Held by ITAT
In the case in hand, there is no dispute that the Assessing Officer called for financial details of these companies and also examine the parties in order to satisfy himself about the genuineness of the transaction. Therefore, on the basis of the record available before him, the Assessing Officer accepted the claim of the assessee. The Commissioner has not found any fault with the details and records filed by the assessee in support of the claim but has cited the reasons that the Assessing Officer has not conducted the proper enquiry. When the entire record was available with the Commissioner then he ought to have given a concluding finding that the view taken by the Assessing Officer is contrary to the law as well as facts emerging from the records. However, the Commissioner has not given any such finding and restored the matter to the record of the Assessing Officer which is not permissible as per the provisions of section 263 when the Assessing Officer has conducted the enquiry and allowed the claim of the assessee on the basis of the examination of the record as well a the parties in person. We further note that the assessee has also filed the bank statements of these companies showing the transaction of payment of share premium as well as loans to the assessee. The transactions were also reflected in the return of income filed by these companies, therefore, in any case if the department has any doubt about the genuineness of arranging the funds by these share applicant companies, the enquiry and investigation should have been conducted in those cases as held by the Hon'ble Delhi High Court in the case of Lovely Exports (299 ITR 268) which has been confirmed by the Hon'ble Supreme Court by dismissing the SLP filed by the department.
One more reasons for setting aside the assessment order in respect of the share premium is the justification of payment of huge premium in comparison to the prospective earnings of the assessee. It is pertinent to note that as per the provisions of section 68, the addition can be made if the transaction of cash credit is not properly explained by the assessee by establishing the identity of the creditor and the capacity of the creditor and genuineness of the transactions to the satisfaction of the Assessing Officer. Therefore, the justification of payment cannot be a sole ground for addition u/s 68. Though the same may be the reason for enquiry and investigation by the assessing authorities to find out the genuineness of the transactions. There is not dispute about the identity of the parties as it was also not disputed by the Commissioner, the source and capacity of these parties were prima facie established by the assessee by producing their financial statements and bank accounts etc. The Commissioner has also found from record the source of payment of share premium as the share application money and loan generated by these companies, therefore, the availability of fund was not disputed by the Commissioner but how that fund was generated by these companies is the only reason for revising the assessment order on this issue. The Commissioner himself has not given a concluding finding about the genuineness of the transactions, therefore, the enquiry of source of source is not warranted when the identity and source as well as transaction through banking channel has already been established by the assessee in view of the decision in the case of Lovely Exports. The Commissioner has also not brought out any fact or material to suggest or cast any doubt about the genuineness of the transaction, accordingly, the setting aside of the assessment order and restoring back to the file of Assessing Officer for fresh consideration is beyond the jurisdiction u/s 263.
Services received by SEZ prior to commencement of authorized operations also eligible for exemption/ refund, if said service is necessary prior to actual commencement of operation Commissioner of Service Tax Vs. Zydus Technologies Ltd [(2014) 52 taxmann.com 376 (Gujarat)] Zydus Technologies Ltd. (the Assessee) filed a refund claim of Rs. 1,75,53,497/- for the services received […]
May 032014
Abstract……..(Plain text)……
COMMISSIONER OF SERVICE TAX Versus ZYDUS TECHNOLOGIES LTD. – Service Tax – GUJARAT HIGH COURT – HC – Denial of refund claim – Whether the Hon'ble CESTAT, WZB, Ahmedabad is right in holding that the services in dispute were used in the authorized operations by a unit situated in SEZ, even though the "authorized operations" as mentioned in the Letter of Approval of Development Commissioner, KASEZ meant "manufacturing" and in its letter dated 2/7/2010 Dy.Collector, KASEZ had asked the said assessee to commence commercial production during the validity period i.e. 28/6/2012 which shows that authorized operations were not started by the said assessee during the currency of the period in issue – Held that:- Considering the facts and decision of this Court in the case of Cadila Healthcare Ltd. (2013 (1) TMI 304 – GUJARAT HIGH COURT), no error has been committed by the learned tribunal in holding that the respondent shall be entitled to refund as claimed. No question of law much less any substantial question of law arise in the present appeal – Decided against Revenue. – 2014 (5) TMI 100 – GUJARAT HIGH COURT – TMI – TAX APPEAL NO. 486 of 2013 With CIVIL APPLICATION NO. 368 of 2013 – – Dated:- 13-11-2013 – MR. M.R. SHAH AND MR. R.P.DHOLARIA, JJ. FOR THE APPELLANT : MR YN RAVANI, ADVOCATE FOR THE RESPONDENT :MR MIHIR JOSHI SR.ADV.WITH MR DHAVAL SHAH, ADVOCATE JUDGEMENT Per: M R Shah: 1.00. Present appeal has been preferred by the appellant- Commissioner of Service Tax, feeling aggrieved and dissatisfied with the judgement and order dtd. 3/9/2012 passed by the learned Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as CESTAT ) in Appeal No.ST/475/2011, by which, the learned CESTAT has allowed the said appeal preferred by the respondent by quashing and setting aside the orders passed by both the authorities below and holding that the respondent shall be entitled to refund as claimed, with the following proposed substantial question of law :- Whether the Hon ble CESTAT, WZB, Ahmedabad is right in holding that the services in dispute were used in the authorized operations by a unit situated in SEZ, even though the authorized operations as mentioned in the Letter of Approval of Development Commissioner, KASEZ meant manufacturing and in its letter dated 2/7/2010 Dy.Collector, KASEZ had asked the said assessee to commence commercial production during the validity period i.e. 28/6/2012 which shows that authorized operations were not started by the said assessee during the currency of the period in issue? 2.00. Facts leading to the present appeal, in nutshell, are as under : 2.01. That the respondent is registered with Service Tax department under the category of Goods Transport Operations , having Service Tax Registration. They filed a refund claim of Rs.1,75,53,497/- vide application dtd. 31/5/2010 in terms of the Notification No.9/2009-ST dtd. 3/3/2009, submitting that Development Commissioner, Kandla Special Economic Zone under letter dtd. 29/6/2009 had permitted setting up a unit to them and the said approval letter was valid for a period of one year from the date of issue. On scrutiny of the claim application, various discrepancies were found and therefore, show cause notice was issued to the respondent. The adjudicating authority, after considering the facts on record and reply of the respondent, the passed the order rejecting the entire refund claim on the following grounds : "(a) The services rendered by M/s.Cadila Healthcare Ltd. (CHL) in terms of the agreement with the appellants and received payments under bill no.9 dated 27/11/2009, 10 dated 31/12/2009 and 12 dated 31/3/2010 did not appear to be related to the authorized operations in the above said SEZ. The appellants in their reply were silent about this objection. (b) The bills raised by CHL did not contain nature of service provided and also the appellants had not produced evidence to show the receipt and use of the specified services in authorized operations in the SEZ. In the defence reply the appellants had not clarified that which services they had received and used in relation the authorized operations in the above said SEZ. There may be many services which can be termed as Scientific & Technical Consultancy Service , and it is to be proved by the appellants at the time of filing the return claim that service tax they had paid on the services received by them are related to the refund claim and they have received and used the same in relation to the authorized operations in the SEZ. (c) The approved list of specified services was dated 20/5/2010 and thus the refund in respect of services received prior to 20/5/2010 did not appear to be admissible and also the appellants were silent about this aspect in their reply. Further it was noticed that said approved list was addressed to the appellants but at different addresses. The appellants in their reply were silent about this aspect and not clarified the said observation. (d) The appellants had not produced copy of their letter applying for extension of period and it appeared that the appellants had not commenced authorized operation of manufacture and as such services received did not appear to be related to the authorized operations. However, the appellants subsequently submitted letter issued by OSD for Development Commissioner, KSEZ wherein they were granted extension for letter of approval upto 28/6/2012 in respect of manufacturing activity. It was found that since the authorized operation had not started in SEZ and so the services received did not appear to be related to the authorized operation". (e) No descriptive bifurcation of the services rendered and service wise service tax paid was provided by the appellants. Hence, in the absence of bifurcation/classification of services, claimed as Scientific & Technical Consultancy Services it cannot be ascertained whether these are specified in the list of approved taxable services. (f) The bills of CHL described the service provided as charges for rendering technical and scientific services for research, development and analysis and testing of the products as identified by the appellants and assisting in activities relating to securing of registration and/or for regulatory approval by appellants for these products in USA and Europe . From the description of services mentioned it cannot be ascertained that the said services and the services related to regulatory approval by for products in USA and Europe appears in the list of approved services. The appellants had not submitted any clarification in regard that how these services can be classified under Scientific & Technical Consultancy service and how it can be considered in the list of approved services. (g) The appellants had contended that it is necessary for SEZ to procure taxable services right from the budding stage and it is only after having obtained such support service of business that the unit would start functioning for production. As per the Notification No.09/2009-ST dtd. 3/3/2009 exemption was granted by way of refund to the taxable services which are provided in relation to authorized operations in the SEZ and received by a developer or units of a special economic zone, whether or not provided inside the SEZ, from whole of the Service Tax leviable thereon under Section 66 of the Finance Act provided units of SEZ actually used the specified services in relation to the authorized operations in the SEZ. In the letter of approval of KSEZ in respect of setting up of SEZ unit to the appellants the ………………
Services received by SEZ prior to commencement of authorized operations eligible for exemption/ refund
Services received by SEZ prior to commencement of authorized operations also eligible for exemption/ refund, if said service is necessary prior to actual commencement of operation
Commissioner of Service Tax Vs. Zydus Technologies Ltd [(2014) 52 taxmann.com 376 (Gujarat)]
Zydus Technologies Ltd. (the Assessee) filed a refund claim of Rs. 1,75,53,497/- for the services received by Special Economic Zones/ Developers (SEZ) vide application dated May 31, 2010 in terms of the Notification No. 9/2009-ST dated March 3, 2009, submitting that the Development Commissioner, Kandla SEZ under letter dated June 29, 2009 had permitted setting up a SEZ unit and the said approval letter was valid for a period of one year from the date of issue.
The Department argued that as such up to June 28, 2012, the Assessee continued to submit application/ sought extension for permitting to set up a unit in SEZ and accordingly, denied exemption/ refund on the ground that the services were not actually used for authorized operations, as the Assessee had not started manufacturing activity/ authorized operations.
Being aggrieved, the Assessee preferred an appeal before the Hon'ble Tribunal.
The Hon'ble Tribunal held that to start the production, it is necessary for SEZ to procure support services from initial stage, hence decided the matter in favour of the Assessee. Being aggrieved, the Department preferred an appeal before Hon'ble High Court of Gujarat.
The High Court of Gujarat relied upon the judgement in the case of Commissioner of C. Ex., Ahmadabad-II Vs. Cadila Healthcare Ltd. [2013 (30) STR 3 (Gujarat)] and held that services received even for period prior to actual manufacture of final product can be regarded as 'commercial activity/ production', if said service is necessary prior to actual manufacturing activity. Hence, in the instant case, the Assessee is eligible for refund/ exemption.
Hiring expatriate employees of Foreign Group Companies under a contract of employment on payment of salaries and related provident fund contributions does not amount to 'Manpower recruitment or supply services' Commissioner of Central Excise Vs. Computer Sciences Corporation India (P.) Ltd. [2014] 52 taxmann.com 256 (Allahabad)] Sciences Corporation India (P.) Ltd. (the Assessee) is a […]
Service Tax on Hiring expatriate employees of Foreign Group Companies under a contract of employment
Hiring expatriate employees of Foreign Group Companies under a contract of employment on payment of salaries and related provident fund contributions does not amount to 'Manpower recruitment or supply services'
Commissioner of Central Excise Vs. Computer Sciences Corporation India (P.) Ltd. [2014] 52 taxmann.com 256 (Allahabad)]
Sciences Corporation India (P.) Ltd. (the Assessee) is a part of a Group of Companies situated in US, UK and Singapore among other countries The Assessee in the course of its business operations hired certain expatriate employees overseas. These employees were either directly employed by the Assessee or were transferred from other Group Companies to the Assessee in India. A letter of employment was entered into between the expatriate employee and the Assessee from the date when the employee was transferred to India for the duration of the employment in the country.
The Assessee incurred expenditure on social security benefits of the expatriate employees in India including by way of provident fund. Tax was deducted from the salaries payable to the expatriate employees on the basis of the total income earned, on behalf of the employees and the assessee issued relevant Forms to the employees, in its status as an employer. The Assessee also remitted to its Group Companies certain social security and other benefits that were payable to the accounts of the expatriate employees under the laws of the foreign jurisdiction and had booked expenses during Financial years 2006-07 to 2010-11.
The Adjudicating Authority confirmed the demand of Service tax along with interest and penalties under 'Manpower recruitment or supply agency services' taxable under Section 65(105)(k) of the Finance Act, 1994 (the Finance Act). On appeal being filed, the Hon'ble Tribunal allowed the appeal filed by the Assessee. Being aggrieved, the Revenue filed an appeal before the Hon'ble High Court of Allahabad.
The Hon'ble High Court of Allahabad after observing that the Assessee obtained from its Group companies directly or by transfer of the employees, the services of expatriate employees for which the Assessee paid the salaries of the employees in India, deducted tax and contributed to statutory social security benefits, held that there was no basis whatsoever to hold that in such a transaction, a taxable service involving the recruitment or supply of manpower was provided by a manpower recruitment or supply agency. Hence, the matter was decided in favour of the Assessee.
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